In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

My wife hates it when I tell stories about her in financial circles, but sometimes different needs call for different deeds.

Friday last week (Feb 25) was an emotional day. It started with the first thing I saw on Twitter — footage of a Ukrainian father saying goodbye to his daughter as she was evacuated and he stayed to fight.

He looked my age, she looked about the age of my youngest.

You know the rule: don’t trade emotion.

I went on the business TV that morning and tried to put things in context (without choking up):

“Hey let’s just prove to the rest of the world and ourselves that it’s not always about lines on a chart. Let’s just be mindful that there’s real people out there saying goodbye to their kids while we worry about what the price of wheat is doing.”


Getting perspective

I’m not going to lie — I think the way my peers in this (often awful) industry have conducted themselves this week has been of a standard I didn’t believe possible.

We have a job to do but we acknowledge the humanity behind it (now I’m getting all choked up again).

So anyway, the Friday ended with my wife (aka The Cheese: First of her Name, Mother of Dragons) and I drinking affordable white wine and watching the business channels into the wee hours.

I’ve lived with this person since 2005 and this is the first time she’s ever watched CNBC.

For a start, the conclusion she came to is that “what you do is stupid”, which is fair.

The other conclusion she made was just as true but far more poignant: “Everyone is worried or worrying or causing a reason for other people to worry. You all think too much.”

I went on to explain the basis for my industry (most of which I made up on the spot); supply chains and risk and innovation and why you need to always be aware of the risk to know why things are moving.

If you’re lucky, maybe you’ll stay one step ahead.

But Jim Cramer came on and started on his nonsense and I had to concede: maybe we give too much credence to the worry.

Panic makes great headlines.

The current situation is a whole news feed filled with panic, and it’s often hard to see the good in any of this.

Except this guy…this guy is setting a really high bar for world leaders everywhere:

Ukrainian leader Volodumyr Zelenskyy


Where to look in a war zone

I reiterate what you need to keep in mind this week:

1. You’ll be wrong, then right, then wrong at least one time around by the time any trade you put on is settled. It’s called volatility. If you buy an option when volatility is up then you can still be right on direction and lose money.

2. Markets still hate uncertainty.

3. Sell-offs on fear of nuclear war are a buying opportunity.

4. Food (wheat, corn, beef etc) was scarce before; it was already a standout buy before this. For the first time, I’m hesitant to recommend it to clients. That’s how far it’s run.

Now for the new stuff:

Germany is on its way back to being militarised. That isn’t a tradable event but does set the scene for world leaders everywhere to make energy policy (and a lot of policy) without much regard for certain areas of opposition.

For example, nuclear policy is properly back on the table. Hydrogen should get some love too. Coal as well.

Basically, long (bullish) Australia and the stuff we dig out of the ground.

Basically, anything that doesn’t come from Russia.

ETF Securities has a tidy little hydrogen ETF (ticker:HGEN) which is showing signs of life again.

I don’t have a direct uranium investment other than a small Canadian play I keep close to my heart that’s too speculative to mention here.

Commodities are hot and will get hotter.

We mentioned it on the podcast late last week (thanks to Stockhead’s erstwhile Dep Ed Sam Jacobs for the input), but the phrase “commodity strength” should be on your wall for the next month at least.

Next on the “new stuff” list: Russia is now being frozen out of the financial system.

Physically buying things from Russia is getting near impossible. That will put a burden on the above-mentioned commodities.

Again, there’s some small names in the above that will struggle to go down if the price of the above goes up.

The ETFs, if you want something less speculative than a company digging things out of the ground, are a Google search away.

Again ETF Securities have a physical Palladium ETF (ticker ETPMPD), and it’s a great way to get set if you think palladium will carry on with this.

The bottom line

The bottom line? It’s this: Yes, what we (finance people) do is stupid — but only when we spend the whole time worrying about things.

Cut through the panic and play the tape to the end. Food security is getting more important and energy policy is changing.

Invest accordingly and if you do, don’t whinge about the volatility.

Also, a quick reminder; at the end of the week (Friday), US employment data for February will land. The Friday after that is the big one — February US inflation data.

Remember the Fed? Last night, Russia’s central bank jacked interest rates 1,050 basis points in one fell swoop — from 9.5% to 20%.

Extreme? Yes — and another reminder that we’re investing through the middle of a major global conflict.

All bets are off, but it doesn’t mean the US central bank won’t still have a job to do to contain inflation.

That’s probably worth worrying about.

And lastly; hug your kids.

The views, information, or opinions expressed in the interview in this article are solely those of the writer and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.